A year from now, we are hopeful that the war with the corona virus was just a short-lived battle never intending to change the landscape of what is to come. Like all other “events” in the mortgage industry, this too shall pass. However, today we are unable to look to the future for answers. Even if we had a crystal ball, we’d be at a loss to decipher the message.

What Do We Know Now?

1. Unemployment Rate:

More than 5.2 million people filed for unemployment benefits during the week of April 13, 2020.  Add that to the underemployed or unemployed already in the system; and we are looking at 22 million individuals seeking new jobs. To the mortgage lending and banking industry this translates to a huge loss in mortgage payments for April.

JP Morgan Chase and Wells Fargo Home Mortgage have agreed to halt new foreclosures and temporarily waive mortgage payments for borrowers whose finances have been affected by the virus. States and cities have also passed temporary moratoriums on evictions and foreclosures.

On March 28, 2020, Treasury Secretary Steve Mnuchin said that relief in on its way, within three weeks, all qualified American families will be receiving CARES Act funds amounting to an average of $1200 per person. As of April 25^th, MarketWatch announced that:

“The IRS has churned out 88.1 million stimulus checks so far and already paid $157.9 billion — which is more than half the amount of stimulus money that’s been set aside for direct payments to families and individuals across America as the coronavirus outbreak continues.”

2. Mortgages Going Unpaid

Just as we felt we had fully recovered from the mortgage industry meltdown of 2008, we are presented with another financial disaster. Over the past 2 months, mortgage servicers have been flooded with changes to regulations and practices that have created yet another “new normal.”

For each family who has already received a CARES Act stimulus check, the majorities don’t feel it’s going to be enough to keep their loans out of default.  Its not a matter of too little too late, its how soon this country will regain its strength.  How long will it take to spring back?

MBA’s Senior Vice President and Chief Economist, Mike Fratantoni offers a glimpse into survey results collected by the Mortgage Bankers Association between March 2 and April 1, 2020.  “The mortgage industry is committed to providing this much-needed forbearance as mandated by law under the CARES Act. It is expected that requests will continue to skyrocket at an unsustainable pace in the coming weeks, putting insurmountable cash flow constraints on many servicers – especially IMBs.”

Between March 16^th and March 30^th, forbearance requests grew by 1,896%. Single family borrowers may contact their servicers to request a forbearance up to 180 days due to COVID-19 related financial issues.  And, at the servicer’s discretion, that period of forbearance may be increased an additional 180 days.  What this tells us is the timeframe for “springing back” to our normal economy is predicted to take up to a year.

The burden of these costs is expected to be borne by the federal government with special programs created to keep borrowers and lenders afloat. But at this time, we are still unsure what this means to everyone in the mortgage servicing food chain.

3. Pending Legislation

On April 27 2020, the Federal Housing Finance Agency (FHFA) announced that borrowers in forbearance with a Fannie Mae or Freddie Mac mortgage will not be required to repay the missed payments in a lump sum. Other lenders are being encouraged to support this practice.

FHFA has partnered with CFPB to provide information on the Borrower Protection Program.

“Help for consumers is always here at the CFPB through our complaints process. In addition to working with your lender to get an answer for you, we analyze the information to better educate consumers, provide clear rules for financial institutions, and hold companies accountable,” said CFPB Director Kathleen L. Kraninger. “Through the partnership being announced today, the Bureau will share our insights with FHFA and ensure we get their data on how mortgage servicers are working with their customers during this critical time and going forward.”

CFPB posted a bulletin on April 3, 2020 specifically for mortgage servicers, titled The Bureau’s Mortgage Servicing Rules FAQ related to the COVID-19 Emergency.   Click on the live link to Download the PDF for the entire bulletin. The document discusses:

Short-Term Loss Mitigation Options: Congress enacted the Coronavirus Aid Relief and Economic Security Act (CARES Act), Pub. L. 116-136, which ensures that borrowers who have Federally-backed mortgages and who are experiencing financial hardships due to the COVID-19 emergency have access to forbearance (CARES Act forbearance). Can a servicer quickly offer a CARES Act forbearance to a borrower and comply with the Bureau’s loss mitigation rules?

Yes, the CARES Act forbearance qualifies as a “short-term repayment forbearance program” under Regulation X. The mortgage servicing rules already include an exception from certain loss mitigation procedural requirements for short-term payment forbearance programs, such as the CARES Act forbearance. This existing regulatory flexibility permits servicers to quickly offer borrowers CARES Act forbearances.

Early Intervention Requirements: During the COVID-19 emergency, are servicers required to comply with live contact requirements and associated timelines in Regulation X, 12 CFR 1024.39(a) for delinquent borrowers?

In general, yes. However, in response to the COVID-19 emergency, as of April 3, 2020 and until further notice, the agencies do not intend to cite in an examination or bring an enforcement action against servicers for delays in establishing or making good faith efforts to establish live contact with delinquent borrowers as required by Regulation X, 12 CFR 1024.39(a), provided that servicers are making good faith efforts to establish live contact within a reasonable time. See April 3, 2020 Joint Statement.

Continuity of Contact Requirements: Servicers may have difficulties staffing customer service call centers due to the COVID-19 emergency. Do servicers have to assign a “single point of contact” to each delinquent borrower?

No. In general, servicers must maintain policies and procedures reasonably designed to assign personnel to a delinquent borrower that can assist the borrower with loss mitigation options. Regulation X, 12 CFR 1024.40. A servicer has discretion to determine whether to assign a single person or a team of personnel. The personnel may be single-purpose or multi-purpose. Single-purpose personnel’s primary responsibility is to respond to a delinquent borrower’s inquiries, and as applicable, assist the borrower with available loss mitigation options. Multipurpose personnel do not have primary responsibility for responding to a delinquent borrower’s inquiries, and as applicable, assisting the borrower with available loss mitigation options. Regulation X, Comment 40(a)-2.

Electronic Communications with Borrower: May a servicer send electronically the servicing notices required by the Bureau’s Regulation X?

Yes. Disclosures may be provided in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). Regulation X, 12 CFR 1024.3.

Payoff Statements: Does a servicer have flexibility to take more than 7 business days to provide a payoff statement if the servicer has operational challenges due to the COVID-19 emergency?

Yes. Generally, when a servicer receives a written request for a payoff statement from a consumer or person acting on behalf of the consumer, the servicer must send the statement within a reasonable time, but in no case more than 7 business days. However, when a servicer is not able to provide the statement within 7 business days of the request because of natural disasters or other similar circumstances, the servicer does not need to provide the statement within 7 business days but must provide it within a reasonable time. Regulation Z, 12 CFR 1026.36(c)(3). Servicers can provide payoff notices in a reasonable time rather than within 7 business days if they cannot provide it within 7 business days due to the COVID-19 emergency.

Exemptions for Small Servicers: Small servicers may have staffing challenges due to the COVID-19 emergency. Are small servicers subject to the requirements discussed above?

In addition, small servicers do not have to comply with the majority of the loss mitigation requirements in the Bureau’s mortgage servicing rules, including those described above. Regulation X, 12 CFR 1024.30(b)(1). However, three prohibitions apply to small servicers. See Regulation X, 12 CFR 1024.41(j).

4. Help to Fight This Battle

Lenders, Sellers and Servicers are scrambling to meet the immediate and short-term mandates of the federal government. There has been widespread speculation that the requests for forbearance will rise steeply at an unimaginable pace, thus creating more pressure on servicers due to cash-flow constraints. It’s also likely that servicers will be unable to keep up with the volume, requiring hiring and training of additional staff. Despite the pandemic crisis, servicers are expected to keep American’s, who find themselves unemployed, afloat for up to a year. This creates a serious issue for lender liquidity.

Our industry is being put to the test…a test that no one was prepared to take. If measured against the Mortgage Industry Fall of 2008, this may prove to be the more challenging of the two. We are battling an illness with no cure and no definite end in sight. This time we have no one to blame. No one has been dishonest and manipulating. And, there are no fingers to point at the bad guys. Even the best planning and execution may lead to scenarios being played over and over again until we get it right.

 

However, one thing is for sure; we will continue to sell houses and borrowers will continue to buy. The American Dream is still alive.